Residential property is in such demand that investors are targeting all segments and locations, experts agreed at Real Asset Media´s European Residential Investment briefing, which was held at MIPIM in Cannes last week.
“Resi is attractive in every market, mature or emerging,” said Pavlos Gennimatas, managing director, European living team, Hines. “There are different, exciting aspects to every market and there is demand from every generation, from students to young professionals to families to seniors.”
The residential sector, which has shown its resilience during the pandemic, will continue to benefit from buyers’ or tenants’ demand and from investors´ interest.
Built-to-rent is definitely a growth area, as the new generations are aiming for quality of life and they are less likely to buy instead.
“We´re facing growth in the resi sector because young people cannot afford to buy their own flats and economic factors like rising inflation and interest rates will only reinforce the situation,” said Agata Jurek-Zbrojska, partner head of real estate and construction, CMS. “Resi for rent will be even more in demand, even in CEE where it is a very new sector, not yet at the operational stage.”
Competition for assets has led investors to adapt their strategies and venture further afield.
“At the beginning everyone looking at Germany focused on the top seven cities, but with prices rising and offer shrinking there has been a shift to secondary cities,” said Rainer Nonnengässer executive chairman, International Campus. “There are about 30-40 cities that are economically strong, attractive to live in, have excellent universities and a good start-up scene.”
In Poland investors realised the attractiveness of secondary cities from the very start, said Jurek-Zbrojska: “The German funds led the way in Krakow and Wroclaw and everyone followed, because of the universities, good population size and vibrant atmosphere.”
Residential has evolved into an attractive and accepted asset class that fits well into every institutional portfolio.
“We´re interested in markets like Germany or the Nordics which are mature but where the supply/demand dynamics will remain, but also in places like Milan where student housing and BTR are just emerging,” said Gennimatas. “Greece as well is behind in the growth of the living sector, BTR doesn´t exist so institutional capital is now looking at the country.”
Student housing, micro-living and BTR, relative new-comers to the European market, are the sectors that have the most potential.
“Most EU countries provide opportunities, especially where PRS is non-existent or under-represented,” said Nonnengässer. “In mature markets there are re-positioning opportunities.”
The war in Ukraine has led many investors to pause their activity in the CEE region. This is wrong, said Nonnengässer: “The markets in Budapest, Warsaw and Prague have slowed down in the last few weeks, some projects have been suspended and some pulled. It is time to go there.”